Anchor Protocol will be targeting a 20% fixed annual yield on stablecoins—the highest fixed stablecoin rate to-date.
Anchor, a newly launched low-volatility savings protocol by the Terraform Labs team, aims to achieve this 20% rate by passing borrowers’ staking rewards onto lenders, instead of charging a borrowing rate. In other words, the borrowing cost equals the lost staking rewards.
In order to properly incentivize borrowing, Anchor has set up an ANC reward token emission algorithm whereby tokens in excess of the target yield will be reserved as excess funds to later be distributed to borrowers during times when rewards would typically fail to hit target yields.
By recalibrating rewards to push demand, Anchor hopes to achieve a stable equilibrium.